An image of a person pointing to part of a graph
Markets

UBS Unveils Suite Of 12 Volatility ETNs

UBS, the Swiss bank known for its private-client investment services, today unveiled a suite of 12 ETNs aimed at helping investors cope with market volatility in a bid to compete with products from both iPath and Credit Suisse that have combined assets of more than $2 billion.

The offering includes six long-and-short pairs that provide investors with an extensive toolbox that spans six months of exposure to the CBOE volatility futures curve. The long ETNs each have an annual expense ratio of 0.85 percent, while the short ones cost 1.35 percent, according to promotional materials from UBS. The short ETNs also have an “event risk weekly hedge cost” of 0.077 percent, UBS said.

The six new short VIX ETNs and their ticker symbols are:

  • ETRACS Daily Short 1-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:AAVX)
  • ETRACS Daily Short 2-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:BBVX)
  • ETRACS Daily Short 3-Month S&P 500 VIX Futures ETN due Sept. 6, 2041(NYSEArca:CCVX)
  • ETRACS Daily Short 4-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:DDVX)
  • ETRACS Daily Short 5-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:EEVX)
  • ETRACS Daily Short 6-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:FFVX)

Â

The six new long VIX ETNs and their ticker symbols are:

  • ETRACS 1-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXAA)
  • ETRACS 2-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXBB)
  • ETRACS 3-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXCC)
  • ETRACS 4-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXDD)
  • ETRACS 5-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXEE)
  • ETRACS 6-Month S&P 500 VIX Futures ETN due Sept. 6, 2041 (NYSEArca:VXFF)

Â

UBS touted the ability to trade six specific maturities on the VIX index futures curve as one of the more important features of its new product line.

Tactical Portfolio Insurance

At the same time, UBS went out of its way in its promotional materials to stress that its new products are designed for sophisticated investors and not meant to be buy-and-hold investments. Industry sources generally regard such VIX products as insurance products of sorts, a part of a portfolio that gains in value while stock markets are plunging.

The biggest of the existing products, the iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca:VXX), has gained almost 20 percent in the past three months, which roughly marks the beginning of the market turbulence that reached a feverish pitch in August following S&P’s downgrade of U.S. debt.

UBS said each of the ETN’s benchmarks is an excess return index composed of futures contracts on the VIX, or “Fear Index” that has a constant weighted average maturity ranging from one month to six months, depending on the series of the ETNs purchased.

It said each of the rolling indexes rolls on a daily basis according to a predetermined schedule that keeps the weighted average maturity of the underlying futures contracts constant.

UBS also said each ETN has an interest component linked to the 91-day Treasury-bill rate.

ETNs are debt obligations linked to the good faith and credit of the issuing bank, which in the case of the new family of UBS VIX securities is the London branch of UBS AG.

Â

Don't forget to check IndexUniverse.com's ETF Data section.

Copyright ® 2011 IndexUniverse LLC . All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

ETFs

Latest Markets Videos